Interview: Steven Marshall sits down with Czech leading newspaper to discuss České Radiokomunikace (‘CRA’) and Cordiant’s growth strategy

Last month, Cordiant Digital Infrastructure Limited’s Steven Marshall was in Prague visiting portfolio company České Radiokomunikace (‘CRA’) – the Czech Republic’s leading independent multi-asset digital infrastructure platform. Near the infamous Žižkov Tower, at the headquarters of CRA, Mr Marshall had an insightful interview with Marek Miler.

‘A fantastic business’, states Steven Marshall, head of the London-based Cordiant fund, regarding the acquisition of České Radiokomunikace (CRA)

Marek Miler, Editor

Steven Christopher Marshall (63) has been in the broadcasting business for more than 30 years. The British manager boasts over 30 years of experience in the broadcasting industry. Previously, he held leadership positions within various telecommunications divisions of the UK’s National Grid – akin to České Radiokomunikace (CRA) or National Grid Wireless.

Additionally, he spent 11 years in senior management at the Boston-based American Tower Group, one of the world’s largest operators of wireless and broadcasting communication infrastructure.

In 2020, Cordiant, an investment group from Montreal, Canada, established the Cordiant Digital Infrastructure Fund, with Marshall becoming a shareholder and Chairman of the Board. The fund went public on the London Stock Exchange in 2021. Using investor funds, it acquired CRA, the Hudson Interxchange data centre in New York, Emitel in Poland, and the Speed Fiber Group – the second largest player in Ireland’s fibre optic sphere. Its portfolio also includes Norkring België, which owns twenty-five transmission towers in Belgium.

České Radiokomunikace (CRA), under its new owner, the Cordiant Group fund, has embarked on further business expansion – transitioning from the traditional operation of transmitters to data centres. In an interview with HN, the head of Cordiant, Steven Marshall, indicates that other acquisitions in the domestic market are also under consideration.

Three years ago, CRA – the country’s largest operator of television and radio transmitters – got a new owner: the London-based Cordiant Digital Infrastructure Limited acquired the broadcasting company from the Australian Macquarie group. With a price tag of GBP 451 million (approximately 13.5 billion CZK at the time), it represented one of the largest transactions in the domestic telecommunication market.

CRA boasts annual revenues exceeding CZK 2.2 billion, with approximately half of that generated from radio and television signal distribution. The company’s primary clientele includes public and private TV stations, such as Nova and Prima. Notably, CRA’s visibility stems from its network of approximately 650 transmitters scattered across the Czech countryside – from Kleť in Southern Bohemia to the Žižkov Tower in Prague and Ještěd in Liberec.

Leading Cordiant is Steven Marshall, a sixty-three-year-old Briton with extensive international experience in the broadcasting industry. In his initial interview with Czech media, he consistently emphasises the satisfaction of the current owners with the investment. As a great advocate of traditional broadcasting, Marshall identifies numerous new opportunities for further developing CRA.

Furthermore, thanks to recent acquisitions, CRA has emerged as the market leader in cloud services and is well on its way to becoming the largest data centre operator. The company plans to construct a new data centre, valued over CZK 1.5 billion, on the outskirts of Prague, near Zbraslav.

Regarding the acquisition of CRA, Marshall states unequivocally, ‘Absolutely. Consider what we have gained through this purchase: we now possess the country’s top terrestrial broadcaster, the national champion. This strategic position enables us to attract high-quality employees and management, which can be leveraged for broader initiatives. As we expand our fibre optic networks, repurposing unused buildings – once housing analogue technology – into data centres becomes an obvious solution, aligning with customer demand. Currently, we operate seven data centres, with plans for additional facilities. Our next step involves expanding our existing infrastructure between the Žižkov Tower, capitalising on strong demand in central Prague.’

Marshall commends CRA’s forward-thinking management, extending beyond short-term horizons. ‘Their focus extends to delivering results in the third or fourth year of the business plan. Drawing from my experience managing multinational companies worth $100 billion, I consider this management team among the best I have encountered.

How do you view the future of the broadcasting business? Is it not an industry that will eventually be supplanted by the ubiquitous internet streaming?

‘As a big supporter of broadcasting infrastructure, I diverge from the believe that traditional broadcasting is a melting ice cube destined to vanish, replaced entirely by streaming services. I do not believe that. Over the next decade, this transition will not materialise. Terrestrial broadcasting infrastructure will persist for decades to come due to its efficiency in delivering substantial video content to the masses – both in terms of cost-effectiveness and environmental impact, including its carbon footprint. Governments, regulators, and industry stakeholders will recognise that the alternative – switching off traditional broadcasting and investing in alternative facilities – would incur prohibitive costs and environmental consequences.

‘Consider our transmitter here in Prague, which disseminates television content to every household in the area via a single signal and power line. If we were to shut it down, the ensuing demand for data would necessitate massive data centres and extensive fibre optic networks. The associated costs would be astronomical, rendering such a shift unfeasible.

‘Despite this, Cordiant continues its diversification strategy, investing in data centres and fibre optic networks. However, this expansion does not come at the expense of traditional broadcasting or from a believe that broadcasting is on its deathbed.’

But still, the previous owner invested in data centres, in fibre optic networks. And Cordiant is carrying on with that diversification strategy…

So, what lies ahead for the broadcasting business?

‘I am genuinely excited about our upcoming product offerings. These innovations will enhance our services and boost revenue for our customers – the broadcasters. Examples include dynamic advertising insertion and the ability to pause and resume live television broadcasts.

‘Our approach involves integrating traditional broadcasting services with over-the-top (OTT) capabilities. OTT allows viewers to connect to the internet with a simple button press, significantly expanding the functionality of existing TV systems. Currently, we generate revenue from OTT, the Internet, and traditional broadcasting. Our additional revenue streams will come from enhanced functionality. For instance, viewers can pause or rewind live broadcasts and even download content directly from their television sets, either free of charge or for a fee. This broader functionality ensures the longevity of our technology.’

For example?

For example, digital ad insertion, where targeted advertisements can appear during specific programs. These ds might take the form of pop-up banners or be region-specific. By tailoring ads to specific households, we can maximise revenue. Imagine households with avid cartoon viewers – advertisers would find them particularly appealing. Furthermore, digital signals will not be limited to video content; they will also carry other types of information and data. When combined with digital radio signal transmission (DAB), we can broadcast public announcements, stock market updates, weather forecasts, and more.’

Is CRA’s income from the broadcasting business growing at this point?

‘Over the past three years, the primary broadcasting service sector in the Czech Republic has experienced faster growth than the telehousing segment (which involves placing customer equipment, such as that of mobile operators, on CRA towers). Our investment in cutting-edge digital terrestrial broadcasting technology – specifically for TV broadcasting received via conventional rooftop antennas – has significantly expanded our capacity. With the same spectrum, we can now accommodate many more channels. Additionally, we have upgraded several existing channels to enhance picture quality, resulting in improved transmission for viewers. In some cases, these upgrades have led to increased revenue, and we have also extended our broadcasting contracts. Furthermore, we currently have spare capacity to add new channels. In the past twelve months, we have successfully introduced Warner TV, AMC, A11, Sporty TV, and Hit TV to terrestrial broadcasting. Presently, we are negotiating with approximately seven or eight additional TV channels. Thus, we have indeed observed substantial growth in our broadcast revenues.’

Given the Internet age and prevalence of fibre optic networks, some may find your optimism about the traditional broadcasting business surprising…

Everybody seems surprised, but the conventional view does not align with reality – it is, in fact, an absolutely fantastic business.

The existing broadcast frequency licences will expire sometime around 2030. Is that something that raises concerns for you?

I am not the least bit concerned. While terrestrial TV frequencies were initially guaranteed until 2030, the widespread use of terrestrial broadcasting across Europe has prompted extensions beyond that date. During the recent World Radiocommunications Conference in Dubai, government delegations advocated for preserving broadcasting spectrum and allocating it primarily to broadcasters beyond 2030. Notably, television frequencies will not even be discussed at the next conference in 2027, and any evaluation of their use will occur in 2031. Although this does not guarantee a change, governments currently prioritise allocating spectrum to broadcasters. Interestingly, mobile operators may assert their need for spectrum, but the reality is that they are not fully utilising the spectrum they already possess. Obtaining additional spectrum would be convenient for them, especially since they also provide IPTV services (television transmitted over the Internet).’

CRA’s CEO Miloš Mastník announced that this year, CRA’s revenues from other services will surpass those from the traditional broadcasting business. Is that still the case?

‘Indeed, that remains accurate. While the traditional business continues to grow, our expansion primarily focuses on enhancing the capacity of our data centres and improving fibre connectivity.’

At present, CRA ranks among the largest data centre operators in the Czech Republic, following T-Mobile and Cetin. Your ambition is to claim the top spot, driven by your plans to construct a substantial data centre near Zbraslav. How far along are you with that project?

‘Fortunately, we have secured an existing site in Zbraslav. I estimate that we will obtain the necessary permits by year-end. I would like to express gratitude to the government for its support. This facility will be the most advanced in the Czech Republic, representing a fundamental upgrade data capacity – crucial for this country. It will enable us to retain data that currently resides elsewhere but is of significant interest to keep within our borders, benefiting from highly advanced security measures.’

Are you suggesting that data stored in facilities operated by giants like Amazon or Microsoft is not secure?

‘Not at all. However, there is a growing concern, not limited to the Czech Republic, about sensitive national data – such as bank account information or health-related data – being stored abroad. The preference is to keep such data domestically, where regulation and oversight are more manageable.

So, are you betting on this trend?

‘Not only that. The demand for data centre capacity is natural, given our increasing reliance on data services and content downloads. Simultaneously, there is a shortage of high-quality facilities of this type – some existing centres are outdated, while others are reaching capacity limits.’

In 2022, CEO Mastník informed HN that the project would be completed by the end of 2024. However, it appears unlikely to meet that deadline due to delays.

‘Indeed, constructing a facility of this magnitude is an extensive undertaking. First and foremost, we must decommission analogue radio broadcasting on medium waves and secure the necessary permits. This energy-intensive and environmentally unfriendly broadcasting method will be replaced with DAB radio, resulting in energy savings and a reduced carbon footprint. Obtaining permits from various regulatory bodies and local municipalities for the new construction has taken longer than anticipated.’

The Czech Republic is known for its protracted and intricate construction procedures. Would you say you are disappointed with the speed at which the permits have been obtained?

‘A year ago, I might have expressed disappointment, but now we are nearly there, and I am content. We find ourselves where we are. Naturally, faster progress would be welcome. Fortunately, we already have electricity on-site, established fibre optic connections, and road infrastructure in place. Our project adheres to ESG (Environmental, Social, and Governance) standards, emphasising social responsibility and sustainability.’

So, when will the digging and construction start?

‘We anticipate starting proper construction in the second quarter of next year, with an estimated three-year timeline – a standard construction duration.’

Interestingly, it seems that your big competitors, like Google, have abandoned the idea of building in this market. That is good for you, right?

‘Possibly, due to the building permit challenges. However, if we navigate these hurdles successfully, possess suitable land, and maintain an effective management team, companies like Amazon, Google, and Facebook might consider collaborating with us.

‘Large players may perceive the Czech Republic as geographically smaller and thus not a priority. Perhaps they are unwilling to invest the effort required for a foothold here. Nevertheless, CRA is committed to doing the groundwork and assisting them.

Conversely, companies now carefully evaluate their data storage strategies. Experts note a growing trend toward using cloud applications rather than renting space in data centres. Have your original plans adapted to accommodate specific client needs?

‘Our centre will cater to a diverse clientele with varying requirements. One possibility is that multinational internet giants may seek a substantial portion of our capacity.

‘Additionally, some clients require outsourced data management. They currently handle it internally, but security concerns prompt them to entrust this activity to professional facilities. This trend persists, although the Czech Republic lags the rest of Europe in this aspect. Other companies have already outsourced their data to the cloud, but the storage location matters. Governments pressure them to keep sensitive data within their geographical boundaries. Consequently, domestic opportunities will arise. Ultimately, the customer mix will depend on who engages with us first.’

Regarding data centres, CRA has pursued acquisitions since your tenure began. It has acquired a data centre in Moravia from the Aricoma group. Do you see any further opportunities in the market?

‘We have looked at about five or six acquisition opportunities here in the Czech Republic, and several in Germany, actually. Although none worked out in the end, we remain supportive. We are now in discussions with two or three other potential sellers in the Czech Republic. So, who knows…’

Is this related to data capacity and optical infrastructure again?

‘Our focus extends across various product sets, although I can’t delve into excessive detail.’

The Czech market has its unique characteristics, particularly its number of small local telecoms. Is there anything specifically attractive there?

‘We have explored some regional fibre and ISP companies but ultimately decided against acquiring them. Our current acquisitions aim to enhance either our broadcasting capabilities or our data centre capabilities. When I mention broadcasting, I refer to the ability to offer additional services. For instance, in January, we acquired Prague Digital TV, which operates a regional broadcasting network in Prague (with sellers Pavel Fromberger and the Ostrava-based Mediapoli Group).’

‘Additionally, we have secured licenses for DAB radio, including the best radio licence in the Czech Republic. We are fortunate to have a fantastic business and an exceptional management team here, and our goal is to support their efforts for long-term success. In simple terms, we love the Czech Republic.’

What is the volume of investments made by CRA in the three years since you arrived?

‘We have invested almost 100 million euros. These funds have been allocated to upgrading digital technology, DAB, data centres, and acquisitions such as Cloud4Com, the Lužice DC, and Prague Digital TV.’

CRA is Cordiant’s second largest asset, the first being Emitel in Poland. Are there any synergies between the two companies?

‘Yes, but the nature of these synergies varies. We don’t intend to merge the two companies; instead, we celebrate having two strong national champions, each with exceptional management teams. CRA excels in data centres, where Emitel has expanded its mobile tower business. We encourage cross-learning, idea-sharing, and best practices. There are also synergies related to regulatory matters within the EU, dealings with governments, and participation in the World Radiocommunications Conference. Additionally, our joint product development team collaborate with equipment suppliers and service providers. This approach is critical because these businesses adhere to traditional thinking. We are fostering an environment where they can explore new services beyond broadcasting, a mindset shift from their historical practices.

Regarding the IPO, does the fund have available capital for further acquisitions?

‘Absolutely. We can raise debt capital at the fund level and invest it. Additionally, we can approach shareholders, present compelling opportunities on the horizon, and seek additional funding. Being on the stock exchange provides this advantage.’

Would it make sense for you to buy another broadcasting business here in the Central European region?

‘I would love to buy more companies like that, I think it is a great business.’

Do you have anything in your sights in other countries now?

‘It is not something that is going to happen quickly. Discussions are ongoing, but I cannot confirm any announcements for this year.’

Let us continue to discuss the Internet of Things (IoT). A few years ago, there were grand expectations for its rapid growth, with sensors in buildings, households, and businesses. However, the development has been slower than anticipated, and revenues remain modest- including for CRA. What are your thoughts on this?

‘Indeed, the IoT market is still in its preliminary stages. Despite having numerous sensors in operation, it remains relatively small for us. The success of IoT relies on economies of scale. Starting small results in disproportionate overhead costs compared to returns. To achieve greater scalability, consolidation within the field is necessary. Our team has made commendable efforts to develop and expand the market in the Czech Republic. Additionally, we are exploring strategies that will prove beneficial in the upcoming years. Being part of a larger platform is essential. We are actively investigating ways to achieve economies of scale and provide cross-border connectivity.’

How many sensors currently operate within the CRA network? Previously, CEO Mastník mentioned a plan to reach 100,000 by last year…

‘Currently, there are nearly 50,000 sensors covering the entire country. Our network transmits approximately one million messages per day – a fivefold increase compared to the end of 2020. Clearly, market demand is growing.’

There was an interesting development in IoT last year when SimpleCell, a company offering services on the Sigfox technology, fell. Is this an opportunity for you as well?

‘I believe it benefits the industry because Sigfox failed to establish a sustainable economic model. They undercut service prices, continually sought more investment, yet failed to deliver a viable proposition. During my tenure at the American Tower Corporation in Boston, we evaluated Sigfox in the US. However, their approach seemed irrational and lacked coherence.

Broadly speaking, today’s operators can utilise the 5G spectrum, segment it, and allocate channels specifically for IoT activities. This concept has been discussed extensively. For instance, AT&T considered investing in IoT platforms like LoRa or Sigfox but ultimately refrained. Perhaps they did not perceive sufficient revenue potential to justify the spin-off. As the IoT landscape evolves, we will witness more solutions, increased consolidation, and improved platforms. IoT providers will generate revenue, benefiting public services and other users.’